n Expert opinion — UBS

over their orders that electronic
trading brings.

It’s worth noting the emergence of the role of the electronic sales trader as a sign of the
changing approach. Rather than
owning the order, the electronic
sales trader’s role is to help the
client use the right algorithm
in the right venues to maximize
the trade’s outcome. In some
areas, such as in credit, we also
see clients more open to placing passive orders on alternative
venues as well as actively taking
liquidity.

Do you see institutions
accelerating the pace at which
they’re adjusting to the changes
in market structures?

Yes, the early adopters are benefiting from the changes they’ve
made, and that’s stimulated
others to rethink their models.

Challenges abound, but we see
an abundance of opportunities
for clients seeking to maximize
their access to liquidity options
and improve the quality of
execution. n

How is this changing the role of
banks?

The most successful banks going
forward will be those who simplify and streamline client access
to these diverse pools of liquidity. Certainly our approach is
to reduce the complexity so our
clients can focus on their strategy rather than have to build
and support an unwieldy, costly
operational and administrative
infrastructure.

What will be the winning formula
for banks in the years ahead?

Clearly, the winning formula for
banks will be one that directly
addresses clients’ strategic challenges. From the UBS perspective,
that means delivering cost-efficient, dynamic access to a global
network that encompasses all the
pools of liquidity relevant to clients’ needs. Principal trading will
continue to be part of the banks’
capability, but a major objective
will be to bring clients opportunities to interact with the appropriate types of liquidity they need
to execute their strategies.

A critical part of that
approach is providing quality
execution in ways that are verifiable and transparent to clients.
To that end, an important role
for the banks is the systematic monitoring and analysis
required to improve trading
outcomes and make the adjustments needed to be successful in
changing market environments.

What pressures does the
growing electronification of the
markets create?

Broadly speaking, electronic
trading is on a path to capture a
more significant share of trading
in asset categories such as credit,
where adoption rates have historically lagged. Other categories
are already at substantial levels
of electronification. So electronic trading is at the heart of the
capabilities needed to navigate
the new market structure.

Because electronic trading is
inherently more efficient than
traditional voice, this trend
is changing the cost structure
of trading operations. That
puts pressure on market participants to automate their
workflow, develop new skill
sets and take a look at their
organizational structure. For
that reason, clients are looking
at expertise in electronic trading as a critical factor of their
relationship with banks.

How comfortable are investors
with the electronic trading
techniques needed to tap these
alternative liquidity sources?

They’re growing more so. An
important area of our work with
clients is advising on electronic
trading techniques and tools
– which approach may work
most effectively in given market
conditions or venues. Overall,
we’re finding that clients come
to value the increased control

The views and opinions expressed in this material
are those of the author and are not those of UBS, its
subsidiaries or affiliate companies. Accordingly, UBS
does not accept any liability over the content of this
material or any claims, losses or damages arising
from the use or reliance of all or any part thereof.